How Mandelson's attack on Brown has left him as far from the cabinet as ever

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Indy Politics

Gordon Brown complained to a group of journalists on Tuesday that British newspapers were obsessed with personalities rather than policy when they reported politics. A few hours later, the Chancellor had a graphic example of what he was talking about.

A weighty speech by the Chancellor about the euro was spectacularly drowned out by his old enemy Peter Mandelson, who told female political journalists over lunch at the fashionable Quod restaurant in Haymarket that it would "damage" Tony Blair and the New Labour project if the Government ruled out a euro referendum before the next general election. In off-the-record comments, Mr Mandelson went further, explaining that Mr Blair had been "outmanoeuvred" by Mr Brown because the Chancellor was obsessed with politics "24 hours a day, seven days a week".

For once, Mr Brown might not be too upset to see one of his speeches eclipsed. The view among Labour MPs yesterday was that Mr Mandelson's intervention had damaged himself, Mr Blair and the pro-European cause much more than the Chancellor.

Although Mr Mandelson still enjoys a close relationship with Mr Blair, Downing Street quickly distanced itself from the former cabinet minister, dismissing him as a mere "backbencher" who did not know what was going on in the Cabinet's discussions on the euro. Mr Blair's official spokesman said: "Mr Mandelson is a backbencher - no more, no less. The important thing is not what he or others say is happening because they are not involved in the process."

The Labour MPs Tom Watson, a Labour Movement for Europe member, and Jon Cruddas, from the rival Labour Against the Euro, said in a joint statement: "For weeks Mr Mandelson has been scurrying around Westminster, mounting a highly personal, shrill and divisive campaign using the single currency to divide the Government, split the Labour Party and undermine the Prime Minister and the Chancellor. This campaign has now been exposed for all to see and it must stop immediately."

It was probably unlikely that Mr Mandelson, who has twice had to resign from the Cabinet, would have been brought back when Mr Blair reshuffles his ministerial team in the next few weeks. But hopes for his return among some pro-euro allies have been extinguished by the latest controversy. One Europhile minister said: "I wish Peter was in the Cabinet. This episode shows why he is not." Mr Mandelson's outspoken remarks were damaging because they gave the lie to the extraordinary joint statement by spokesmen for the Prime Minister and Chancellor last Friday, insisting they were totally united on the euro. Some cabinet colleagues believe privately that the two architects of New Labour have never been further apart.

The irony is that Mr Mandelson's claim that Mr Blair has been outmanoeuvred is almost certainly right. Mr Blair would like to call a euro referendum before the next general election, a course opposed by Mr Brown. But the Chancellor holds the whip hand. His five economic tests appealed to Mr Blair because they gave the Government maximum flexibility on calling a referendum. What Mr Blair underestimated was Mr Brown's iron determination to remain the guardian of the tests.

From time to time, Mr Blair has reassured pro-euro cabinet ministers that it would all come right in the end because he would "square Gordon". His optimism is now looking misplaced; there is little sign that Mr Brown will be "squared" for some time.

Mr Brown is haunted by the Tory government's eviction from the European exchange rate mechanism (ERM) in 1990. The fact that he supported entry as a shadow minister is often forgotten because the Tories took all the blame. But he is utterly determined not to repeat the mistake by joining the euro at the wrong time, the wrong rate or for political reasons.

He wants to build lasting public support for joining "from the bottom up", believing that people will only vote "yes" in a referendum if they are persuaded that membership will bring economic benefits.

Of course, Mr Blair does have one nuclear weapon: to sack or move Mr Brown. But that would make winning a referendum even harder and it already looks tricky enough.

A more likely scenario is that Mr Blair wins a form of words that would keep alive the option of a referendum this Parliament but would be unlikely to deliver one in practice. In the Cabinet's discussions, which continue at its weekly meeting today, pro-euro ministers will try to erode Mr Brown's veto by broadening the five tests into a "road-map" that sets out the specific hurdles to be cleared before a referendum is called. But it all looks a long way away.